As predicted, the home business movement has received a hefty boost from the recession-that-wasn't-a-recesssion-but-now-turns-out-to-be-a-serious-recession downturn. With the job losses still reported daily, it's no surprise that dismissed professionals are seeking an occupation where they get more control over their lives.
In this recent downturn, the laid-off workers have different skills than workers booted in past recessions. The bulk of the layoffs are not coming from the blue-collar workers in manufacturing jobs. Those jobs have long been pouring into the developing world, particularly Asia, and mostly to China.
The so the millions of newly laid off workers tend to have titles like Vice President of Business Development or Director of Ecommerce, even the previously prized engineers are getting tossed. The corporations just love sending these folks to the bone yard. It's their way of shedding all association with the new economy which roundly gets the blame for the downturn.
These new outcasts are professionals with substantial education and management experience. They're not going to spend their time trying to figure out how to live on unemployment until the factory starts calling 'em back. Corporations don't want to bring these managers back. Instead, the companies are making their retained workers do more. Plus, the outsourcing trend will grow as the recession eases. Already, high tech companies are buying engineering services from India and China.
As the managers empty their desks into a brown box, they know they're not coming back. So they're walking away bitter. They're also walking away with a 401k plan and a vested pension. they're smart; they're ambitious; and they have a pocket full of money. They don't want to find themselves - ever again - at the mercy of a large corporation. And they don't want to sit around watching their savings trickle away on living expenses. They're going to start their own business.
The government statistics on business start-ups runs about two year's behind the times, so these emerging entrepreneurs have not appeared on the Small Business Association or Bureau of Labor Statistics radar, but I'm seeing it anecdotally every day. As I cover the franchise industry, it's clear that business is picking up.
Laid-off middle managers are perfect fodder for the franchise industry. These are not your die-hard entrepreneurs who want to flex their control-your-own-fate muscles. True entrepreneurs would never stand for the restrictions of a franchise. To succeed with a franchise, the owner must follow proven system to the tee. Real entrepreneurs constantly see a better way of running the business and can't help but tinker. Middle managers, however, have a great deal of respect for systems. Otherwise, they would have left their corporate homes long before getting the boot. Franchise companies just love these corporate mangers. They're smart; they're motivated; they're focused; they have money; they have credit, and they're team players.
In the past, new franchisees came from other business start-ups or they had recently retired young and still wanted to be productive. In the last 12 to 18 months it's a new breed. Now they're former vice presidents and managing directors. These former corporate employees are much more risk aversive than their entrepreneurial counterparts. The prospect of a 90-plus success percentage is very attractive. For the wild and wholly entrepreneurs, success rates don't matter, since they're convinced that the odds do not apply to them After all, they're smarter and quicker than the crowd.
Not surprisingly, a good portion of the new franchisees seek a home-based business. The reasons are varied. Some want to quit the grind of a long commute. Others want to be close to small children. All of them cite the benefits of a low overhead that gives them a better chance at succeeding.
According to the Bureau of Labor Statistics, there were 4.1 million home-based businesses in 1999. These are the most recent figures. The number doubled during the 1990s. You can bet we'll see new a surge in 2001 and 2002.
Rob Spiegel is the author of Net Strategy (Dearborn) and The Shoestring Entrepreneur's Guide to Internet Start-ups (St. Martin's Press). You can reach Rob at spiegelrob@aol.com